Tuesday, September 29, 2015

Daily Trumpeter update: Tax cuts could cost US trillions

Trump has a plan to cut taxes but offers little in the way of explaining how he will pay for them. The LA Times has the story (reprinted in the Daily Star).

"He’s very specific about the nature of the tax cuts, but very vague about the nature of the tax increases," said Howard Gleckman, senior fellow at the nonpartisan Urban-Brookings Tax Policy Center. "Politicians of both parties have been playing that game forever, and he’s just doing it too."

It’s clear the cuts would benefit the wealthiest Americans more than anyone else, Gleckman said. Trump’s plan would eliminate the federal inheritance tax, a cut that could produce a windfall for his own children. The tax applies to estates of $5 million or more for individuals, and $10 million or more for couples.

When it comes to revenue cuts, there is no free lunch despite what Trump claims.

Kyle Pomerleau, an economist at the nonpartisan Tax Foundation in Washington, said it was highly unlikely that the overall plan would cost the government nothing, as Trump asserted.

"Even accounting for additional economic growth from the plan," he said, "it still wouldn’t be able to claw back the revenue losses."

And along the way rich bankers will benefit the most from Trump's tax plan.

For months, Trump hinted that he would break with his party and crack down on tax breaks for Wall Street. His plan does include elimination of the so-called carried interest break that has enabled hedge fund titans and private equity investors like Mitt Romney to pay lower tax rates than the middle class.

But it’s not clear that Trump’s plan would actually raise taxes on the group. Most of their investment income is now taxed at the top 23.8% rate for capital gains. Under Trump’s plan, it would be taxed as ordinary income, at the new top rate of 25%. Whatever investors earned in ordinary income, currently taxed at 39.6%, would be taxed at a maximum of 25%.

Because much of the other earnings of Wall Street’s richest bankers is already taxed as ordinary income, the net result could be a substantial drop in their overall income taxes.